Welcome to Part I of our Money + Love mini series where hosts Cristina and Will discuss financial compatibility in relationships with three special guests. Returning for the second time is Rod Griffin, the Senior Director of Consumer Education & Advocacy at Experian, and two newlyweds from Addition Financial, Jordan and Katie George. They answer questions about how to have money conversations early in a relationship and share their own experiences with setting a strong financial foundation together. And we wrap up the episode with a fun financial spin-off of The Newlywed Game to test everyone’s knowledge of their significant others!
Cristina asks Question 1:“Let’s start with a big picture question that I think we need to answer right off the bat. Why is money such a contentious topic in romantic relationships?”
Rod responds: “In large part because it’s so core to achieving what you want in life. If you don’t have your goals aligned, it can be very difficult to work together as a couple. And if you don’t have a lot of money, the way you approach your wants versus needs becomes especially critical in the relationship.”
“It’s also about control – feeling like you can’t have the things you want when you want them. That can create tension, especially if one person uses money to control the other or one person feels like they’re losing control.”
Will asks Question 2: “When do you think it makes sense for couples to talk about money? Obviously it’s not a first date kind of question, but how serious do you need to be before you have a talk about financial philosophies and goals?”
Jordan responds: “I think early on is good. Money can be a taboo subject that you tend not to discuss with a lot of people because it can be a sensitive subject. I mean, there’s not many people in your life that you would discuss your pay, your credit score, your purchasing habits, your borrowing habits, etc.”
“But really the earlier you can start having discussions about how you prioritize your spending and what you want to be working toward as a couple, the better. Whether that’s buying a car or a house or something further off like saving for a child’s college tuition, those you probably won’t dive into right away. But something small like setting aside a budget to go out on dates or how you plan to buy gifts for each other or what kind of vacations you want to go on, those types of conversations are really good to have pretty early on in the relationship.”
Katie also responds: “There are things you can talk about early on that will start to uncover how your significant other views money. When they talk about their family and how they were raised, for example. Or you could ask how old they were when they got their first job. You can even talk about student loan debt – so many people have it, I don’t think it’s crazy to talk about. Also look at when they pay for things, do they put it on a debit or credit card? These are little things that I took a mental note of early on.”
Jordan follows-up: “Katie did a really vulnerable thing early on by asking for my help with her own budgeting that I think is a good note for other couples. It was really important for me to not make Katie feel bad about any of what she was sharing with me because it really is a vulnerable thing to put that kind of visibility around how you’re spending your money. It could have easily turned into me nitpicking her financial decisions. Instead, it was important for me to focus on the things she was doing right and encourage those while still having conversations around things she wanted to work on without any blame or shame.”
Cristina asks Question 3:“What do you think are the key questions to ask about financial compatibility before you take a relationship to the next level, whether that means moving in together or getting married?”
Rod responds: “One of the first and most contentious questions we had to answer after we first got married was around how we planned to set up our emergency savings. And I think it was contentious because it meant we had to figure out what we were going to give up for a while to reach our savings goal. It took us six months to save up $1,000 because we were just starting out and not making much. My wife’s financial habits were a bit different at that time and we had to work through that to reach the long-term goal.”
“Long-term goals can seem harder because they are seemingly over-the-horizon, unknown. And coming to an agreement on where you want to be in the distant future is harder to do. Spending is pretty easy to do unfortunately – saving is a lot harder.”
Will asks Question 4:“When does it make sense to combine finances and what are some ways to do it? Is it ever okay not to do it?”
Katie responds: “I would say whatever works best for the individual couple. Jordan and I lived together for several years and didn’t combine finances. We just decided how we were going to split all of the bills and handled it that way. We ultimately decided to combine finances when we knew we were going in on something that had both our names on it – our house. We knew it would make life a lot easier if we opened a joint account and put part of our paycheck into that account to pay for things related to and around buying a house together since we were both listed on the mortgage.”
Jordan also responds: “Yeah, when it came to buying the house it just made sense and was a good place to start. What has worked well for us is that we have our joint account that we use to pay everything that we are both on, but we also keep separate accounts for fun money. That way we each have our own funds to do what we want without any sort of criticism – we never fight over that little stuff. As long as we are paying ourselves first, putting money into savings and paying our bills, we are in a good place. It’s a little bit of the best of both worlds.”
Rod also responds: “We do a similar thing: we have ‘ours,’ ‘mine,’ and ‘yours’ accounts that lets us take away judgement on how we’re spending. If there are things we are doing together, we will talk about the spending. We are also joint on our individual accounts as well so that way we each have full access to what’s there and there are no secrets. That was core for us to build trust and have transparency with each other.”
“I’m kind of old fashioned, but I think one clear point for combining finances is when you’re legally merging your lives through marriage. That would be a great time to think about how you want to blend your finances because at that point you have a legal relationship that can affect your future if the relationship ends.”
Cristina asks Question 5:“What kind of ground rules would you recommend?”
Rod responds: “The thing that works for us is to make every money conversation about goals – start there. So we may not even be talking about money; it’s about where we want to be or what we want to do. For example, planning a vacation or buying a house or a car. You look at what it will take to reach that goal and work your way down to the financial aspect. Money becomes the goal achievement tool, rather than a barrier. If we start the conversation about shared goals, it eliminates the potential for conflict.”
Jordan also responds: “One ground rule we set was automating as much as we can – a ‘set it and forget it’ mentality. Most of our bills are on auto pay, so we never have to worry about missing a payment. We also allocate money to our savings based on percentages so regardless of what changes may happen to our earning or spending, we have everything set up accordingly. The only time we need to have a discussion is if there is a new goal we are saving toward.”
“I like what Rod said a lot. Goal focused conversations are so much easier – as long as you and your partner are aligned on those financial goals. If you are, then it’s easy to justify why you do or don’t spend money at certain times. One example for us was our wedding. That was a huge financial cost, so we had to make saving for it a priority by shifting money from other places to focus on that goal. We didn’t want to start our marriage in a huge amount of debt and we were able to avoid that by planning properly.”
Katie also responds: “Yeah, and I was really focused on not wanting to surprise Jordan with things if he were to pull up a credit card statement or check bank balances. We had a lot of talks about how to shift our money around to prioritize saving for our wedding and we always talked about those decisions together before making them. That is such a critical ground rule to set. No one likes surprises when it comes to money.”
Will asks Question 6:“What if there’s a big disparity in income? How can couples negotiate those differences in a way that’s equitable?”
Jordan responds: “One thing Katie and I implemented early on was not splitting bills 50/50, but instead basing the split off the percent of income that is coming into the household for each person. For example, if one person is making 60% of the income coming into the household, then they would pay 60% of the bills. The other person would cover the remaining 40% because that is how much they are earning.”
“This keeps everything fair and allows for equitable contributions to the household. And each person then has their own money left over to spend how they want in proportion to what they are earning. This is a good general practice for couples, no matter what the pay disparity looks like.”
Katie also responds: “I was really impressed because Jordan handled that early on by himself. I expected everything to be split down the middle, but Jordan took the initiative and broke everything down that way. It made me trust him more and that fairness allowed me to be more vulnerable with him when it came to money.”
“At this point, all of our money is our money. We said that out loud together and made that agreement. It’s not your paycheck and my paycheck anymore, these are our paychecks.”
Cristina asks a follow-up question:"Rod, what would you suggest for families that have a stay-at-home parent? How should they navigate those waters?"
Rod responds: “I agree with Katie here – our money is our money. It’s not about who is making more. It’s not good for a relationship if one person is using their higher income as a power play to manipulate or discourage the other person.”
“My wife was a single mom, so I can tell you raising kids is the hardest job in the world. So if your significant other is a stay-at-home parent, they are pulling their weight just as much as the working parent. There may not be a paycheck involved, but they contribute just as much. It takes both of you to run the household, raise a family and take care of each other.”
Executive producer Lauren joins the gang to play a financial spin-off of The Newlywed Game where our hosts, guests and their partners answer questions about each other’s financial habits.
At the end of each show, we share a resource that our listeners can use to make it count in their lives. This episode we shared The Principal Guide to Achieving Financial Security When Settling Down. It’s got a ton of useful information about what to do when you’re getting ready to settle down, whether you’re a new couple or starting and growing your family.